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Apple rumored to directly provide raises to Foxconn employees

post #1 of 65
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A new report suggests Apple could address employee issues with its manufacturing partner Foxconn by directly compensating workers with profits from products assembled overseas, including the iPhone and iPad.

According to CBS-owned Chinese news site Zol.com.cn, Apple plans to provide Foxconn employees between 1 percent and 2 percent of the profits from its products. The report was translated by MIC Gadget.

The media outlet said that Apple conducted an investigation of Foxconn, as it publicly promised to do, and found that recent employee suicides were related to low wages at the company's massive factory in Shenzhen, China. The Cupertino, Calif., company could address the issue by providing additional wages to workers that would come directly from the profits of products assembled there.

The report claims that the first to receive the pay boost will be those who work on the iPad production line. Currently, it said, Apple pays Foxconn about 2.3 percent of the total price of the iPad.

Last week, Foxconn announced it plans to give a 20 percent pay raise to its employees. The revelation came after at least 10 people committed suicide at the Chinese plant this year alone.

Entry-level workers at the company's factory in Longhua reportedly earn just over 900 yuan, or $131.80 U.S. per month before overtime and bonuses. A recent undercover report from Southern Weekend revealed that employees sign "voluntary overtime affidavits" to take home more than the local minimum wage that can be earned through a regular 36-hour workweek.

Apple's own investigation into Foxconn was announced last week. The company said it is "saddened and upset" by the suicides that have occurred there recently, and it would assign its own investigative team to carry out an independent inquiry.

Apple, along with numerous other electronics makers, partners with Foxconn for the building of its products. The Taiwan-based company assembles iPhones and iPads for Apple. Last week, other technology giants, including Nokia, Sony, Dell and HP, joined in showing concern over the labor conditions at the Chinese factory.
post #2 of 65
These overworked workers deserve every penny they can get. I think Apple should divert 2-5 percent of their annual profit to the well-being of these workers, some of whom are going to be permanently injured by the chemicals used to manufacture these profitable gadgets.
But then, you realize that the reason for moving these manufacturing is the first place is to maximize profit.

Will Apple help the Chinese workers? The jury is still out there.
post #3 of 65
I don't get something here - if
Quote:
Apple pays Foxconn about 2.3 percent of the total price of the iPad.

and the iPad price is $499 (for one model) does that mean Apple's cost of manufacturing each iPad is only $11.47? (not including shipping it around the world.

Or does that mean the gross profit that Foxconn makes is $11.47 per unit? I would be really surprised if the total cost of materials and manufacturing was only $11.47. unless that $11.47 does not include the materials cost. if the total cost of materials and manufacturing was more like $111.47 that would not surprise me. that is about 22% rather than 2.3% of the total. and a 20% increase on that is about $20. maybe the numbers are backwards - 20% of the total price is the direct charge from Foxconn to Apple for each unit shipped and the worker increase is 2.3%.
post #4 of 65
Quote:
Originally Posted by lilgto64 View Post

I don't get something here - if and the iPad price is $499 (for one model) does that mean Apple's cost of manufacturing each iPad is only $11.47? (not including shipping it around the world.

Or does that mean the gross profit that Foxconn makes is $11.47 per unit? I would be really surprised if the total cost of materials and manufacturing was only $11.47. unless that $11.47 does not include the materials cost. if the total cost of materials and manufacturing was more like $111.47 that would not surprise me. that is about 22% rather than 2.3% of the total. and a 20% increase on that is about $20. maybe the numbers are backwards - 20% of the total price is the direct charge from Foxconn to Apple for each unit shipped and the worker increase is 2.3%.

I think Foxconn just assembles the items. Other companies supply the parts.
post #5 of 65
Hopefully workers of other assembly lines (IBM, HP and so on) will survive this news...
post #6 of 65
Apple pay that $11.47 (or whatever) to Foxconn to assemble the iPad. I'd guess Apple are entirely responsible for sourcing the components and getting them to Foxconn's factories.
post #7 of 65
Quote:
Originally Posted by OC4Theo View Post

These overworked workers deserve every penny they can get. I think Apple should divert 2-5 percent of their annual profit to the well-being of these workers, some of whom are going to be permanently injured by the chemicals used to manufacture these profitable gadgets.
But then, you realize that the reason for moving these manufacturing is the first place is to maximize profit. :

The only reason we have affordable high tech products is because of disregard for the environment and poor working conditions in China.

In the US., EPA regulations, medical insurance, retirement, unions, wages, land, construction, taxes, would make the iPad cost prohibitive. Apple wouldn't even sell them because almost no one would be able to afford it if it was manufactured here.

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post #8 of 65
Maximize profits!
post #9 of 65
How about they just forget these slavelabor foreign partners and start building their products stateside again? They'd have tighter controls on their products and score some good P.R.
post #10 of 65
Nokia, Sony, Dell and HP, beyond "expressing concern" when it comes to providing additional overhead for workers wages as Apple is alleged to have done (whether that is in fact the case actually remains to be seen)?

But time and again it is Apple that gets targeted and blamed for the conditions at FoxConn, and somehow these other companies get ignored for their complicity in the situation. It would be interesting to find out, if you can, what percentage of the line is actually used to produce Apple products, versus Nokia, Sony, Dell and HP products. And if Apple is etiher carrying a disproportionate load of the blame or is in fact using a larger percentage of the line production capacity of the FoxConn operations.

One other observation. If Apple provides additional wage supports for those workers on the iPad lines, will that encourage inter-line feuding or perhaps a higher suicide rate on the other lines? One aspect of this situation that doesn't seem to get much coverage is the fact that FoxConn offers a very large settelement to the families of the suicide victims. Given the high incident of suicide in China,the reported lower personal perception of worth, the younger age of the workers, etc. - how much of this is actually reinforced behavior that needs to be addressed?
post #11 of 65
Well, if so, that is a start for Apple. Apple rakes in billions of dollars in profits; profits gained by either overcharging for its products, or, more apparently, underpaying its employees. Remember, it is how we treat the least amongst that really counts.
post #12 of 65
It is time for Apple to start manufacturing in the USA again.

I remember when they made most of their computers in the US, but as they drive to expand profit, they killed off the us based manufacturing plants, i am not even sure if the Mac Pro is made in the US anymore even.

but "Made In China" means alot different from Made in the United States
post #13 of 65
Quote:
Originally Posted by BenRoethig View Post

How about they just forget these slavelabor foreign partners and start building their products stateside again? They'd have tighter controls on their products and score some good P.R.

Great idea! If, as some people suppose, the US products would cost a whole lot more, then Apple could offer Made in the USA branded versions for those of us who care and could still afford them.
post #14 of 65
Quote:
Originally Posted by mstone View Post

The only reason we have affordable high tech products is because of disregard for the environment and poor working conditions in China.

In the US., EPA regulations, medical insurance, retirement, unions, wages, land, construction, taxes, would make the iPad cost prohibitive. Apple wouldn't even sell them because almost no one would be able to afford it if it was manufactured here.

Then again, if all those jobs were still in this country, wages might be high enough that it wouldn't be any less affordable than it currently is. Obviously, off-shoring jobs (not to mention hiring illegal immigrants) drives down wages in this country by decreasing demand for labor.
post #15 of 65
Apple should give them stock. That would be an even greater incentive!
post #16 of 65
Quote:
Originally Posted by justbobf View Post

Well, if so, that is a start for Apple. Apple rakes in billions of dollars in profits; profits gained by either overcharging for its products, or, more apparently, underpaying its employees. Remember, it is how we treat the least amongst that really counts.

Remember Apple pays Foxconn, and Foxconn is the one "underpaying" its employees although it seems to pay more than other companies in China. Foxconn also makes products like the PS3, XBox 360, Wii, Intel motherboards, components for HP and Dell computers and more according to Wikipedia.

Apple directly paying Foxconn employees would set a dangerous precedent. It takes the responsibility off Foxconn to shape up, doesn't help employees making other companies products, and possibly exposes Apple to legal liability. Perhaps this is the only way to improve the lives of the workers in the short term, and it will look good in the media, but I can't see this being a good long term solution.
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post #17 of 65
I'm split. On one hand I doubt more money is gonna compensate for (reportedly) 14 hours with no breaks (there was a story on either this site or 9 5 mac that showed workers taking a 5 minute nap at their work chair before going back to work).

On the other hand having more money will let them do more with the little time they spend outside the factory.

Of course it would be better if they could just hire more people instead of overworking the existing ones.
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post #18 of 65
Quote:
Originally Posted by BenRoethig View Post

How about they just forget these slavelabor foreign partners and start building their products stateside again? They'd have tighter controls on their products and score some good P.R.

Stateside manufacturing has proven time and again to be disproportionately much higher in cost than most of the rest of the world (by population). There are very well-defined reasons and justifications for most of the US companies shipping production and support elsewhere in the world. Our labor system, while having gained some significant ground for the US worker has virtually guaranteed that US manufacturing costs are among the highest in the world and decidedly non-competitive with most of Asia, South America, and the former Eastern bloc countries, whose standard of and cost of living is substantially lower, and unemployment substantially higher. As each of these countries in turn bring in manufacturing workloads due to attractive (to the client companies)low cost of production, they in turn (by local, not US standards) raise the overall standard of living incrementally until they become less competitive with their neighbors, and manufacturing shifts there in turn. This helps their national economies by raising the standard of living, but cost of living rises also, and while a new middle class develops, very little is done about the poverty endemic to their economy.

Thus manufacturing tends to migrate to the lowest economies, or the lower economies with the highest available resources (eg: workers) and most susceptable to loose controls around working conditions. It has been argued that this system actually slowly raises the national economies, reducing the disparity between the US and those other economies, but the gulf is so great that it will take decades or more of such growth before global economies come anywhere near the US economy under those circumstances. And most of those countries do not have targeted high yield nature resources (like the oil-rich Middle East) to support their manufacturing economies, and so are immediately impacted when they become less attractive from a cost perspective.

So while calls for moving manufacturing back to the good old US of A are laudable, they do not reflect the disparity of these costs, they do not reflect on the limited beneficial aspects of the global manufacturing migration, and they usually spring out of a misguided sense of patriotism, a failure to recognize the intertwined state of global economies, and the nature of the US economy.
post #19 of 65
There are a million ways this could go wrong.
Let's say, only Apple pays the Foxconn employees more.
Then, everyone would want to work on making Apple products. Fighting over positions. Maybe worse..

What the companies need to do is to go together, put pressure on Foxconn to raise wages and put caps on overtime etc.

I think the average customer could pay 5 dollars more for an iPad, knowing people don't work themselves to death making them. I know I would.

Additionally I think this takes away the responsibility from Foxconn who should be the one addressing this problem. Apple probably makes a nice 50% percent profit on the iPad. Sure development etc needs to be payed but come on. Foxconn could charge more without Apple leaving them and with assurances that the extra money goes to the men and women on the floor.

And please don't call me a communist.
People should not have to kill themselves to feed their family with the benefits.
post #20 of 65
Quote:
Originally Posted by lilgto64 View Post

I don't get something here - if and the iPad price is $499 (for one model) does that mean Apple's cost of manufacturing each iPad is only $11.47? (not including shipping it around the world.

Or does that mean the gross profit that Foxconn makes is $11.47 per unit? I would be really surprised if the total cost of materials and manufacturing was only $11.47. unless that $11.47 does not include the materials cost. if the total cost of materials and manufacturing was more like $111.47 that would not surprise me. that is about 22% rather than 2.3% of the total. and a 20% increase on that is about $20. maybe the numbers are backwards - 20% of the total price is the direct charge from Foxconn to Apple for each unit shipped and the worker increase is 2.3%.


It should say apple pays around 2.3% of the BOM cost (not price) to foxconn for what is known as conversion cost. It cost Apple $2.30 for every $100 in BOM costs to have Foxconn Manufacture the product for Apple. 2% to 6% is the going rate for conversion costs in China today.
post #21 of 65
Why subsidies? Why not jobs for Americans?
post #22 of 65
Quote:
Originally Posted by BenRoethig View Post

How about they just forget these slavelabor foreign partners and start building their products stateside again? They'd have tighter controls on their products and score some good P.R.


How much more are you willing to pay for all your toys?
post #23 of 65
Quote:
Originally Posted by ilogic View Post

Why subsidies? Why not jobs for Americans?

Production facilities will come stateside again when robots can do all the work (and until they form a union).
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post #24 of 65
Quote:
Originally Posted by BenRoethig View Post

How about they just forget these slavelabor foreign partners and start building their products stateside again? They'd have tighter controls on their products and score some good P.R.

The all new, U.S.-made, union-built Apple iPad. Now only $999-$1,499.
post #25 of 65
Quote:
Originally Posted by ilogic View Post

Why subsidies? Why not jobs for Americans?

So the way to stop the suicides at Foxconn is to remove all the jobs from Foxconn?

Do you realize that the cost per device would go up substantially. If the average wage is $140/month at Foxconn, excluding the cost of power, the plant and whatnot, the wage difference alone would be at least 10x(?) as much per employee.

Unless Apple can automate the process substantially their is no feasible business model that would make bringing this back to the states feasible. The raise they are reportedly offering to Foxconn workers already adds $150 million a year to their expenses.
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post #26 of 65
Every time I see things like this and all the people who come out and say how terrible it is that people make so little, you know it was not too long ago in this country people got paid this little as well and over time things got better. Just because the US has now gotten to the point of people not having to work for low wages and have all it benefits and doing things to improve the environment now they feel the everyone else in world should be doing the exact same thing.

You all forget the fact that you are living off the exact same thing the US did 100 years ago to get where it is today, you can no condemn these people, governments and companies for doing the exact same thing the US did in it past.

If you feel this strongly about what is happening elsewhere go there and help these people fight to improve your life because sitting here and complaining and calling Apple bad or threatening not to buy Apple products will not change a thing. Actually even going to help these people will not help, these people do not want you to help them, because they know when you leave and you will leave things will only get worse for them.
post #27 of 65
Quote:
Originally Posted by quinney View Post

I think Foxconn just assembles the items. Other companies supply the parts.

I hadn't thought of that - Apple contracting directly with component suppliers to send the parts to Foxconn - then with Foxconn to simple put them all together - $11 a unit for final assembly sounds more reasonable.

I was thinking Foxconn would be buying the component parts and then aggregating the total cost up to that point and Apple paying a single bill.

probably works better to have your own contracts with the component suppliers so the assembler doesn't mark them up 100%.
post #28 of 65
Quote:
Originally Posted by cmf2 View Post

Production facilities will come stateside again when robots can do all the work (and until they form a union).

This is too true, do you know one of the few products mass produced in the US is the GE light bulb, they can make it for far less then they could if they made in china. GE light bulb factor is complete automated, there is very few humans involved in the actually manufacturing of the light bulb. GE at one time looked at moving this overseas to save costs and found out it would cost more, since China does not allow automation especially for tasks which a human could easily do. Any time equipment is installed into a factory in china the government has to approve it and make sure it does not take away a works job. Kind of sounds like what the Unions use to due in the US at one time.
post #29 of 65
[QUOTE=lilgto64;1643004
I was thinking Foxconn would be buying the component parts and then aggregating the total cost up to that point and Apple paying a single bill.
[/QUOTE]

This is what does happen, Foxconn buys most of the parts except for critical apply only parts and bill Apple for the parts plus the conversion costs, some of the parts they add an additional mark up on which is unknown since the mark up varies by part. Foxconn true profits are unknown from each product they build.
post #30 of 65
Think how disheartening it must be to make maybe just enough money to survive, while assembling devices (toys) for the rest of the world. Don't know how a token raise will help when there's little joy in life or job.
post #31 of 65
Quote:
Originally Posted by mstone View Post

The only reason we have affordable high tech products is because of disregard for the environment and poor working conditions in China.

In the US., EPA regulations, medical insurance, retirement, unions, wages, land, construction, taxes, would make the iPad cost prohibitive. Apple wouldn't even sell them because almost no one would be able to afford it if it was manufactured here.

Right on, sir. We have met enemy, and it is us, the electronics consumer.
post #32 of 65
Quote:
Originally Posted by masternav View Post

So while calls for moving manufacturing back to the good old US of A are laudable, they do not reflect the disparity of these costs, they do not reflect on the limited beneficial aspects of the global manufacturing migration, and they usually spring out of a misguided sense of patriotism, a failure to recognize the intertwined state of global economies, and the nature of the US economy.

So wanting to revitalize the manufacturing base in the US is misguided and not beneficial to the world economy? That's Keynesian economics for you... the faulty assumption that natural resources and economic growth is unlimited, employees and facilities are just 'resources', and that profits can always increase if a business is run 'properly'. It's too bad that 99% of the business people and economists in the world still subscribe to that fallacious philosophy.

In fact, it is that ideology that has lead to the steady erosion of the manufacturing and technological base in the US because of 30 years of Republicans giving tax breaks to corporations for shipping such jobs overseas. This of course has not been without the possible collusion of the governments of China and the US to make sure that the environmental and labor laws of China facilitate the exporting of manufacturing jobs from the US to China.

Quote:
Originally Posted by cincytee View Post

The all new, U.S.-made, union-built Apple iPad. Now only $999-$1,499.

I suggest you look up a few facts; labor union power and membership are at all time lows in the US, and the only time they have been lower is the first decade when labor unions first came into being back in the early 1900's. The Republican Plutocracy that has ruled the US for the last 30+ years is directly responsible for this (are you old enough to remember Reagan firing the air-traffic controllers?)

This has been combined with a simultaneous assault on education in the US so that we are now at a point where our ability to compete in these sectors is so low, we're already well behind China and India and other asian countries. Of course, this hasn't countered the fact that the cost of living in the US is so much higher than that of any other country in the world, because so much of what is earned by the average person in the US is now going directly into the offshore bank accounts of companies like Wal-Mart, Exxon, Safeway, and so many more.

Think I'm spewing BS here? Check the facts with congress's OMB. Again, labor union membership and political influence are at an all time low in the US, and the average income in the US has fallen repeatedly over the past ten years. In contrast, the amount of taxes paid by individuals has risen while the amount of taxes paid by corporations has fallen. Even in those corporations, the salary gap between the lowest and highest paid workers has increased in the process. So the rich are getting richer, and the poor are getting poorer. Again, don't believe, go to the OMB's website and see for yourself.
post #33 of 65
Quote:
Originally Posted by ghostface147 View Post

Maximize profits!

This move by Apple is very much in line with profit-maximizing behavior. I applaud them for it, and also also think it is good for their bottom line in the long run (because of the positive reputational impact). Also, if competitors had to match it, their costs would be raised.
post #34 of 65
Quote:
Originally Posted by mitchelljd View Post

It is time for Apple to start manufacturing in the USA again.

I remember when they made most of their computers in the US, but as they drive to expand profit, they killed off the us based manufacturing plants, i am not even sure if the Mac Pro is made in the US anymore even.

but "Made In China" means alot different from Made in the United States

Are you sure the quality can be matched stateside today? (This is a serious question.)

You should not underestimate the obsessive attention to quality in some of these production/assembly lines of foreign manufacturers in Asian factories, including in China. I am not suggesting that all of them have it -- many do cut corners -- but I would imagine a company like Apple brooks no quality deficit among its suppliers.
post #35 of 65
As reported in many media outlets and reference in wikipedia, Foxconn is the largest manufacturer of electronics and computer components in the world.

The reason many large American, Japanese, and European companies use Foxconn is because they are one of few companies that can deliver on very large volume orders.

Apple moving their assembly and manufacturing work to the US would be nice, however, I doubt there are any American companies that can deliver on the large volume orders that Apple has. Would that mean that Apple would then have to handle assembly and manufacturing themselves. That's an expensive proposition when you factor in property taxes, costs of running those facilities, higher us wages, health care costs, possibility of union ...

Sure Apple would still make a profit if they moved production stateside, but I suspect they might be at a disadvantage to their competition who might have more money in their warchest to go after Apple. Also profit hungry wallstreet would probably slam apple's stock.

Apple is not responsible for worker's conditions at Foxconn. It's the Chinese Government's responsibility to set and enforce reasonable worker/employer guidelines and regulations.
post #36 of 65
Quote:
Originally Posted by solipsism View Post

So the way to stop the suicides at Foxconn is to remove all the jobs from Foxconn?

Do you realize that the cost per device would go up substantially. If the average wage is $140/month at Foxconn, excluding the cost of power, the plant and whatnot, the wage difference alone would be at least 10x(?) as much per employee.

Unless Apple can automate the process substantially their is no feasible business model that would make bringing this back to the states feasible. The raise they are reportedly offering to Foxconn workers already adds $150 million a year to their expenses.

Plus, the entire supply chain components is located substantially closer to China than the US, making it far cheaper to transport and assemble there (and just ship the finished product here).

This train has so left the station......
post #37 of 65
Quote:
Originally Posted by justbobf View Post

Well, if so, that is a start for Apple. Apple rakes in billions of dollars in profits; profits gained by either overcharging for its products, or, more apparently, underpaying its employees. Remember, it is how we treat the least amongst that really counts.

Whereas other companies do not rake in billions of dollars in profits. But guess what? It isn't because they are overpaying their employees or lavishing them with comforts or assembling their cellphones in middle America. They're doing the same thing as Apple is (I would argue, worse) but not able to make money, AND, don't care enough to do anything about it.
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post #38 of 65
Quote:
Originally Posted by serkol View Post

Hopefully workers of other assembly lines (IBM, HP and so on) will survive this news...

who knows? we don't hear about this stuff until apple is involved. all the haters don't really care about anyone else. after all, dell and hp (and others) have been using foxconn for YEARS and we never heard about this.

i suspect that this all has to do with apples competitors sending their worker bees out into the blogosphere to see what kind of damage they can do to applerather than put out any real competition or innovation.

america loves a hero so they can trample and step on them.
post #39 of 65
Quote:
Originally Posted by Netcrawler View Post

Think how disheartening it must be to make maybe just enough money to survive, while assembling devices (toys) for the rest of the world. Don't know how a token raise will help when there's little joy in life or job.

This is not a token raise. It is quite substantial.

1% - 2% of profits is approximately 0.2% - 0.4% of revenues (assuming these have the same 20% profit margin as the rest of Apple). Assuming an average sale price of $600 per iPad, that is $1.20 - $2.40 for each iPad sold. That is 10% - 20% of what it costs to assemble the whole product there!
post #40 of 65
Quote:
Originally Posted by mstone View Post

The only reason we have affordable high tech products is because of disregard for the environment and poor working conditions in China.

In the US., EPA regulations, medical insurance, retirement, unions, wages, land, construction, taxes, would make the iPad cost prohibitive. Apple wouldn't even sell them because almost no one would be able to afford it if it was manufactured here.

I believe that's a copout. The only thing that would change would be Apple's profit margins which would be nowhere near 50%. That being said it won't happen.
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